Getting to the bottom of how and why Ontario’s Slots at Racetracks Program ended

Perhaps the biggest bombshell in the standardbred breeders’ $65 million lawsuit against the province of Ontario and the Ontario Lottery and Gaming Corporation (OLG) over the cancellation of the wildly-successful Slots at Racetracks Program (SARP) is that lawyers allege it was the chief of staff for the former Finance Minister that recommended to give the horse racing industry zero compensation for cancelling SARP.

A 55-page Highlights of the Factum of the Plaintiffs (Summary Judgment) prepared by lawyers representing the Standardbred Breeders of Ontario Association (SBOA) alleges it was Tim Shorthill, the former chief of staff to former Finance Minister Dwight Duncan, that “decided without any new information, analysis or study” to recommended against the discussed plan to phase SARP out over three years and compensate the industry with $250 million the first year, $150 million in year two and $100 million year three and beyond.

None of the allegations have been proven in court and the case was still not resolved as of the posting of this story despite five days of hearings from Sept. 10-14 in a Brampton, ON courtroom. Word is the case is scheduled to resume in court in December of this year. In the meantime, the on-the-record testimony of a number of top political officials — including two premiers, a finance minister and heads of the OLG and Ontario Racing Commission — makes for fascinating reading for anyone interested in the truth of how and why SARP was cancelled.

Considering the blow SARP’s cancellation dealt to Ontario’s thoroughbred industry, there’s a lot to be gained by the SBOA’s case aimed at extracting truth and compensation.

To date, lawyers Jonathan Lisus, Ian Matthews and Vivien Millat of Lax O’Sullivan Lisus Gottlieb LLP of Toronto certainly have gotten some very interesting information on the record, much from some very powerful people.

The Highlights of the Factum prepared by the SBOA’s legal team just prior to the material being presented in court, reads like a who’s who of political power — Duncan, former premiers Dalton McGuinty and Kathleen Wynne, former agriculture minister Ted McMeekin, former OLG CEO Rod Philips, former chief economist Don Drummond and many more testified under oath.

All along, the SBOA lawyers allege — and back up this allegation with strong testimony — that the horse racing industry was kept in the dark and not properly consulted. They also allege that the impetus for cancelling SARP came from the OLG which ran the SARP program.

“In October and November 2011, OLG recommended to Finance that ‘OLG relocate slots away from racetracks, and build new casinos in the GTA (Greater Toronto Area) and elsewhere.”

Before Christmas in 2011, the government had agreed to a three-year phase out of SARP. By Feb. 3 (2012), a “three-year plan was finalized in the Cabinet material and ‘minutes’. The Cabinet package was ready. Then, ‘on the eve of cabinet’ within the space of a little more than one hour ‘something magical happened.’ Mid-morning Friday, February 3, Tim Shortill, Minister Duncan’s Chief of Staff, decided without any new information, analysis or study to discard the three-year plan and advise Minister Duncan to cancel the revenue share effective March 31, 2013. A two line email at 11:34 a.m. decreed the ‘position was changing’ to a ‘complete exit… just the notice period and out.’ Staff scrambled through the weekend to scrub the material and minutes and make 120 copies. The change was not communicated to any of the ministers and staff who had been briefed on the three-year plan.”

Shortill testified in the case and, “acknowledged telling Minister Duncan and the Premier’s Office to ‘go to $0’ and that his decision was based ‘solely’ on his ‘general knowledge’ of the government’s ‘priorities for funding healthcare and education, not subsidizing the horse racing industry.’ He knew ‘very little’ about the standardbred breeding industry. He did not know the breeding cycle of a racehorse… He had no study or analysis of the impact of his advice. His knowledge of SARP was that ‘a percentage of revenue generated from the slots was directed towards the horse racing industry.’”

The factum reports that lawyers for Ontario deny, “that the decision was made by Messrs. Shortill and Duncan. It produced the entire submission for the Cabinet meeting but refused to permit examination of any witness on the Cabinet meeting and it led no evidence that the decision was made at the meeting. There is no evidence or law that this decision had to be made by Cabinet.”

The factum later states, “In April 2014, the Auditor General confirmed that the decision to ‘go to $0’ was made by the Minister of Finance’s Chief of Staff.”
Yet, this was all allegedly predicated on a flawed OLG plan, the SBOA lawyers allege.

“OLG’s statute restricted its ability to locate casinos in municipalities. It required a favourable municipal referendum, notification from the municipality that it was supportive, and demonstration by OLG of the cost and viability of the proposed casino. As of March 2012, OLG had not taken any steps to comply with these requirements. It had no idea whether it could locate its slot machines in urban centres – the core premise of its plan and the ostensible reason SARP was ended. When it later took the necessary steps its plan was rejected by cities, most notably Toronto by a 40-4 margin. Now it had nowhere to put its slot machines because it had terminated the (site-holders agreements) effective March 31, 2013, putting a billion dollars of revenue a year at risk. Suddenly racetracks had enormous leverage. OLG rushed to negotiate leases at between 250 per cent and 1800 per cent above the market rate identified by its appraisers. It had to pay $80.6 million in settlements even though no compensation to tracks was due on termination.”

Breeders Deceived About SARP Cancellation

Meanwhile, the SBOA lawyers allege the OLG and Ontario government not only kept its plans to end SARP secret, it told the horse racing industry the program would continue.

In July of 2009, standardbred breeder and former Woodbine Entertainment Group (WEG) director Jim Bullock met with Duncan because the various site-holder agreements (SA) between the racetracks and the OLG concerning SARP were due to expire.

“Mr. Duncan assured him he understood breeders’ need for long-term commitment and stability and the short-term SA renewals would be addressed. Breeders were told of Mr. Duncan’s assurance. Mr. Bullock was not challenged on this evidence. Mr. Duncan had no recollection but said he had no reason to doubt it.”

A year later, in July of 2010, all SAs were renewed for five years or longer. “Ontario and OLG documents confirm their awareness that renewal would bring confidence and stability to the industry.

“In its consultations in 2011, OLG met with standardbred racing and breeding associations. It did not disclose its plans (to end) SARP. In fact, the consultations only addressed how SARP could be expanded and improved. Standardbred representatives appreciated the assured commitment. The Auditor General in 2014 criticized OLG’s lack of transparency and openness.”

The Highlights of the Factum also refers to email evidence that Ministry of Finance staff responsible for “phasing out” SARP “emailed each other that “99% of Ontarians don’t care about horse racing” and the “only thing that keeps me going is the thought I might still be here when the entire Slots at Racetracks program is either slashed brutally, [or changed in a way] that gets rid of the notion that horsemen have of slot money being ‘their’ money.’”

At the same time, SBOA lawyers allege, Duncan and former premier Dalton McGuinty were publicly talking positively about SARP to the horse racing industry.

“In 2011, Minister Duncan wrote industry participants emphasizing the importance of SARP and the government’s commitment to it. He continued to tell the Estimates Committee SARP was an important long-term racing and breeding program. Premier McGuinty wrote to a standardbred industry association in September 2011 saying his government ‘value[s] the positive impact that the horse racing industry has on the agricultural sector… and we believe in working closely with the industry to ensure it remains strong and prosperous in the future.’ This email was published online and promoted.”

The SBOA lawyers allege other cabinet ministers, including Agriculture Minister Ted McMeekin and Kathleen Wynne, who would succeed McGuinty as premier, were shocked when they learned SARP would be cancelled with one year’s notice and the horse racing industry would receive no compensation. Both politicians believed the plan was to go with a three-year phase out and compensation.

“McMeekin said he learned of the decision when the public did: ‘[t]he little bit of consultation that we had seemed to be heading in a different direction and then suddenly it was jettisoned’ and ‘something magical happened.’ He testified the decision was ‘sprung on Cabinet.’ He said the three-year plan would not have caused the harm that the ‘go to $0” decision did.’

“Premier Wynne was briefed on the three-year plan. She testified that she ‘had no involvement in or exposure to’ the ‘go to $0’ decision. She only understood what was decided well after the Cabinet meeting. Both said the decision was not made properly or ‘thoughtfully’ or with ‘due consideration’ for its impacts.

“Cabinet was told there was extensive consultation with the industry and experts. There was no such consultation as Mr. Philips and Mr. Shortill confirmed.”
Then, once SARP was cancelled, the ruling Liberals went on the attack to try to use it as a wedge issue against the Progressive Conservatives.

“On February 26 (2012), as fear spread through the industry in the midst of the breeding season, the Liberal party released radio attack ads: Did you know that Tim Hudak’s PCs started a secret subsidy for a few, very wealthy racetrack owners? And now in these times of restraint, Tim Hudak says these rich payouts should be protected. He’d cancel full day kindergarten, leaving 50,000 four and five year olds stranded. Are we really going to spend more on horse racing than full day kindergarten? The PCs should do what’s right. Tell Tim Hudak his priorities aren’t your priorities.”

Former WEG CEO David Willmot testified that the ads were “the most despicable behaviour by a government I have ever seen in my life,” former PC cabinet minister John Snobelen said they were “inaccurate … to an unacceptable level, even in a political ad” and “absolutely not true…” He testified, as did Wynne, that the ads would cause breeders to have “deep concern about their livelihoods and the viability of their breeding operations and farms.” Phillips testified the ads were inaccurate and served no gaming policy. McMeekin said the ads “blew me away.” McGuinty testified the ads were “stretchy” with the truth, “liquid” with the truth and “truthy.” He agreed standardbred breeders were “unfairly characterized,”’ and that the industry was an “incidental casualt[y]… [u]nfair… and not something I would support.”

All of which suggests, at the very least, what many in the horse racing industry already suspect — that there was gross incompetence by the OLG and the Liberal government on the SARP file.

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